Future Outlook for AMD Stock Over the Next Three Years

Shares of AMD have not seen the same impressive gains that have been enjoyed by its competitor, Nvidia. However, this situation may shift in the coming years.

Since October 2022, stocks have experienced a bull market. An exciting development occurred in November 2022, when ChatGPT introduced the concept of artificial intelligence (AI) to a broader audience, leading many investors to invest enthusiastically in AI-related technologies.

Among the sectors enjoying growth, semiconductor stocks, in particular, have thrived. The VanEck Semiconductor ETF has registered a remarkable return of 194%, far outperforming the Nasdaq Composite gain of 88% and the S&P 500 increase of 68% during the same time.

Nvidia has been a major player in this surge, increasing its stock price by an astonishing 1,100% since the start of the current market upswing. In comparison, AMD's stock has appreciated by 110%, which is favorable but pales in comparison to Nvidia's staggering growth. Despite this, there are signs that AMD may be on the verge of its own substantial increase.

Nvidia's Early Advantage

During the rapid development of AI technology, Nvidia has stood out because of its strong presence in the computing and networking field. The company’s top-performing Hopper and Ampere graphics processing units (GPUs) have experienced huge demand, primarily due to their use in generative AI applications. Throughout much of the last two years, Nvidia has dominated the GPU market, controlling around 90% of it.

While such a significant lead might make one hesitant to invest elsewhere, it’s crucial to consider AMD's growing presence in this space.

AMD Gains Ground

AMD has made notable progress, recently launching the MI300X data center GPU in December 2023. While this came nearly a year after Nvidia established its dominance in the market, AMD’s growing success is noteworthy.

Not only are tech giants like Meta, Oracle, and Microsoft enhancing their operations by integrating AMD’s MI300 accelerators alongside Nvidia’s offerings, but AMD's data center GPU business has also evolved from a minor player into a multi-billion dollar operation with steady growth each quarter. In contrast, Nvidia's growth in the data center segment has begun to show signs of slowing down.

This expansion has allowed AMD to capture roughly 10% of the GPU market, creating a competitive landscape largely dominated by AMD and Nvidia.

Time to Consider AMD Stocks?

At the start of the current bull market in October 2022, Nvidia’s market capitalization was around $280 billion. Today, its value has skyrocketed to over $3.3 trillion, an incredible more than tenfold increase.

Interestingly, AMD's current market cap sits at $200 billion, not far off from where Nvidia was valued prior to its explosive growth. This suggests that investors may be underestimating AMD's potential in the coming years as the company continues to expand its data center business.

With plans to release successor GPUs from now until 2026, AMD is positioned well to disrupt Nvidia’s stronghold. As a result, investors seeking growth may eventually shift their focus towards AMD as an alternative.

While Nvidia remains a strong investment, its dramatic growth spurt may be behind it. In contrast, AMD appears to be poised for an impressive upward trajectory. Currently, AMD stocks seem to be attractively priced, and it is likely that their value will be significantly higher three years down the line as AMD's narrative in the AI landscape continues to develop.

AMD, Nvidia, stocks